Summary of notes and ideas
In terms of investing, there are not many more secrets about Warren Buffett. He’s an open book and tons has been written since. However, in terms of management, that seems to be different.
1. Pick the Right Business (and Business Model).
Here, we’re told that the best companies to invest in and to work for are those with strong financials and balance sheets (as opposed to the touchy feely stuff like values, vision and so on). Buffett goes for companies that have unique products, scale advantages that allow them to generate significant margins, have healthy price/earnings ratios, generate good margins, and stay away from debt.
Those he admire include Coca-Cola, Wrigleys, Wal-Mart and Apple, while General Motors comes with a huge “stay away” warning. Known for sticking to long-term rather than short-term investments, Buffett prefers to address the fundamentals rather than adopt technical analyses of businesses (he poo poos much of the investment banking community).
Quoting from the book: “..if you find yourself working for a company with poor inherent economics, it is better to get out now than it is to stick around year after year waiting for things to change.” Good advice indeed, at least for those who want to succeed financially in a company that issues fat paychecks!
2. Delegate Authority (and Choose the Best Employees).
In this section, the authors shared how Buffett delegated and empowered his CEOs (there are 88 of them), and focuses on a few outstanding individuals among the pack. Warren’s style is one of picking the right people and giving them as much leeway as possible to get the job done. Painted more like a coach and mentor, he doesn’t scold his business leaders if they make mistakes but instead, encourages them to do better.
Adopting a principle of management by asking questions (rather than issuing orders) – a stark contrast that with the other legendary business leader Steve Jobs – Buffett focuses on the major things and leaves the rest to his managers. The mantra used is “Delegation to the point of adjudication”.
If you want to find out more, read the full book: